Calexico could face lawsuit from landowner

CALEXICO — This city may face a lawsuit that it can't defend after the City Council did not approve a complicated settlement agreement with Raul Estrada at a special City Council meeting Monday.

According to the agreement rejected by a 2-3 vote, Estrada would have agreed to not sue the city for illegally paving a .74 acre piece of his property behind the Calexico 10 theater complex and he would have brokered a deal with a restaurant and hotel developer looking to build properties on his land just north of the theater.

In addition, Estrada would have donated land to the city so it could build two streets that would be used by patrons of the restaurant and hotel.

In exchange for that donation, the city would have had to pay Estrada no more than $300,000 if he lured up to two hotels and a restaurant to that land. The city also would have had to pay a per-acre fee when Estrada sold small parcels of land he owns that abuts the new streets.

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If Estrada sues the city for improving the sliver of property that it did not own, there is little the city could do, according to city officials. Estrada's attorney said that cost to the city if it lost could total around $300,000.

After the meeting, Estrada said he might jack up that potential hit to the city by suing for damages including discrimination.

The agreement the council rejected Monday had been revised after a flurry of last-minute telephone calls and faxes Friday and Monday. City Attorney Michael Rood said it was better than the previous agreement the council did not approve last week.

Mayor Pro Tem John Renison called the deal "convoluted" because it lumped together new litigation issues, old settlement agreements and economic development concerns.

After almost 40 minutes of discussion in closed session, City Councilman Javier Alatorre said the council should table the matter and discuss it at a public hearing. He said if the agreement were "much, much improved" after a week of discussion there would be no reason people shouldn't be allowed to look at the agreement and give some comments.

Alatorre said he didn't have enough time to scrutinize the more complicated aspects of the agreement since it was handed to him just before the meeting.

Heber-area agricultural businessman Steve Scaroni called for a public hearing on the agreement. He said the revised version he read and a short conversation with Estrada's attorney helped him understand what was going on but the public still needed more "time to digest this."

Then, with Estrada's attorney John McClendon of Orange standing at the opposite podium, Scaroni said, "By the way, I overhear that you worked in David McEwen's law firm."

McEwen, of Newport Beach, wrote and revised the agreement the council was considering.

McClendon said he had been an employee at McEwen's law firm in the mid-1990s.

Scaroni said, "Isn't that a conflict of interest?"

McClendon responded, "You could ask an attorney."

"I'm asking you," Scaroni said. "You're an attorney."

Carrillo interrupted and said he didn't think there was any reason to believe the two lawyers wouldn't be able to work on an agreement in a fair and legal manner.

Alatorre said he was "embarrassed." He wanted to know why the council had not been informed of the past relationship between McClendon and McEwen.

Rood said, "I thought I had mentioned that. … We've worked with Mr. McEwen for years. I don't see it as a conflict."

Renison asked McClendon why the settlement and the economic development issues were all "thrown into one agreement."

McClendon said, "I made it real clear that we would not go to even the first step with them (developers) until the city made good on past agreements."

McClendon conceded the agreement was "idiosyncratic" but said it was a great deal that other cities would jump at.

Calexico Hometown Buffet owner Carlton Hargrave said, "This deal should not even be considered by the City Council."

Regarding the possibility the council would pay a per-acre price in addition to the price Estrada received for some of his parcels, Hargrave said, "That's a business transaction between private parties. That's what determines the fair-market value of the property." He also called for a public hearing.

Grijalva said the council needed to take action instead of worrying about "people in the audience."

"You were elected to represent. Represent!" he said.

After Carrillo talked about the possibility of increased revenues for the city if the projects became a reality. Alatorre made a motion to table the matter for a public hearing. He and Montoya voted in favor of the motion and Carrillo, Renison and Grijalva voted against.

Carrillo made a motion to approve the agreement. He and Grijalva voted in favor of the motion and Renison, Alatorre and Montoya voted against.

Renison then made a motion to settle the litigation matters separately from the economic development part of the agreement. Rood discussed this issue with the council in closed session for around 20 minutes and when everyone came back, no action was taken.

McClendon said the restaurant and hotel developer might walk away from the project.

"I'm just a messenger here but I've been told the hotel developer is frustrated beyond belief," he said.

Estrada said he doesn't think the litigation issues can be separated from the development issues.

"How can they be separated when they have made all these mistakes?" he said.

>> Staff Writer Aaron Claverie can be reached at 337-3419 or claverie7@hotmail.com.